Indian Contract Act: Consideration & Capacity

Study Notes

Consideration

Consideration entails an exchange, understood as "quid pro quo," meaning something is given in return for something else.
It can encompass various forms such as money, goods, services, or even a promise to do something.
Consideration can occur in past, present, or future contexts, allowing flexibility in contractual agreements.
Section 23 of the Indian Contract Act, 1872 mandates that consideration must be lawful, meaning it should not contravene legal norms.
An example of unlawful consideration: Chanderilal's promise to secure a government job for Gadha Prasad in exchange for ₹10 lacs, which creates a void agreement as both the object and consideration are illegal.

The Capacity of Parties

For an agreement to be enforceable, all parties involved must possess the capacity to contract.
A contract becomes invalid if any party lacks the necessary capacity.
According to Section 11 of the Indian Contract Act, 1872, key qualifications for a contracting party include:
- Must not be a minor.
- Must not be of unsound mind.
- Must be qualified by law to enter into the contract.

Consent among parties requires agreement on the same matter in the same sense for contractual validity.
Section 14 of the Indian Contract Act defines free consent as being devoid of any coercive factors, including:
- Coercion: forcing a party to act against their will.
- Fraud: deceptive practices that lead a party to a harmful agreement.
- Undue Influence: exploiting a position of power to manipulate another party's decisions.
- Misrepresentation: presenting false information to influence a party's consent.
- Mistake: when one or both parties are incorrect regarding a fundamental fact of the agreement.
Example of free consent: A owns two cars, one Maruti and one Santro, indicating clear ownership and no coercive elements in the decision-making process.

Description

This quiz covers key principles related to Consideration and the Capacity of Parties under the Indian Contract Act, 1872. It explores the definition and types of consideration, legality requirements, and the essential qualifications necessary for parties to enter into contracts. Test your understanding of these critical concepts in contract law.